Crypto speculation dominates $600B cross-border payments: BIS report

Speculative activity remains closely tied to global funding rates, highlighting cryptos growing “interconnectedness” with traditional finance, a BIS report claimed.

Hundreds of billions of dollars in cross-border cryptocurrency payments flow globally, driven primarily by speculative investment, according to a recent report by the Bank for International Settlements (BIS).

The BIS study, published May 8, found cross-border payments using the two largest cryptocurrencies, Bitcoin (BTC) and Ether (ETH), and the two largest stablecoins, USDt (USDT) and USDC (USDC), totaled about $600 billion during the second quarter of 2024, the final observation period covered by the analysis.

“Our findings highlight speculative motives and global funding conditions as key drivers of native crypto asset flows,” the BIS said.

Cross-border crypto asset flows by quarter. Source: BIS

Still, the report noted that stablecoins and low-value Bitcoin transactions are frequently driven by practical use cases, particularly as alternatives to traditional remittances. The researchers pointed out that geographical barriers have less influence on cryptocurrency transactions compared with traditional financial systems.

Speculative crypto activity remains tied to “global conditions for funding in major crypto markets,” signaling a growing “interconnectedness” between cryptocurrencies and the legacy financial system, the researchers said, adding:

“Concurrently, we observe that tighter global funding conditions, known to curtail risk-taking in traditional asset classes, are associated with reduced flows. This indicates increasing interconnectedness between cryptoassets as speculative assets and mainstream finance.”

Additionally, crypto-specific risks and heightened public awareness significantly influence crypto investment flows, reinforcing their role as speculative assets, according to the BIS.

The findings were published nearly a month after the BIS warned that the number of investors and amount of capital in crypto and decentralized finance (DeFi) had “reached a critical mass,” posing a threat to financial stability and global wealth inequality, Cointelegraph reported on April 19.

Stablecoin, low-value Bitcoin payments fueled by fiat inflation, high transfer costs

Beyond speculative investment tools, stablecoins and Bitcoin are also used as a “transactional medium.”

“Higher opportunity costs of fiat currency usage, such as high inflation, spur bilateral cross-border transactions in both unbacked cryptoassets and stablecoins,” the BIS stated, adding:

“Likewise, greater economic activity within both sender and receiver countries is often linked to increased crypto flows in most cases.”

High remittance fees charged by traditional financial institutions further bolster crypto adoption for international money transfers, especially from developed economies to emerging markets, the report stated.

Global USDT flow map. Source: BIS

The US and the UK accounted for a cumulative 20% of cross-border payments using Bitcoin and USDC, and nearly 30% using ETH.

As for USDT, Russia and Turkey accounted for over 12% of the cross-border transactions using the worlds largest stablecoin.